The Peninsula Foundation

Category: Regions

  • Poverty, Inequality, and Marginalisation as Forms of Structural Violence in Pre-Conflict Syria

    Poverty, Inequality, and Marginalisation as Forms of Structural Violence in Pre-Conflict Syria

    The injustice and inequality built into the structural institutions of the Syrian society can be referred to, what has been called as the ‘structural violence’, by the well-known Norwegian sociologist, Johan Galtung.  

    The ongoing civil war in Syria that has resulted in large-scale loss of lives, and forced displacement of millions across the region, is being seen as one of the bloodiest conflicts of this century. While countries continue to witness the horrors of visible atrocities and war crimes, the underlying layers of structural and cultural violence continue to buttress the egregious brutality which is often more direct, and physical.

     

    Although the war is often seen as a result of the outburst of pro-democracy protests in 2011, a close examination of the country’s socio-economic structures would enable one to get a detailed insight into the underlying layers of frustration caused due to large-scale poverty, inequality, and marginalisation. One would also find that the relatively peaceful structure, which existed before the protests of 2011, was held intact largely due to the existence of single-party dominance, where one actor (Hafez al-Assad, and later Bashar al-Assad) held all power and authority, while those existing in lower ranks of society continued to lack resources, as well as opportunities to challenge the dominant power.

    The Syrian economic crisis has existed long before the commencement of the civil war.

    The injustice and inequality built into the structural institutions of the Syrian society can be referred to, what has been called as the ‘structural violence’, by the well-known Norwegian sociologist, Johan Galtung.  The violence, here, is reflective of a position “higher up or lower down in a hierarchy of exploitation-repression-alienation”, where the parties involved are determined either to keep the hierarchy intact or to completely obliterate it. In the case of Syria, the deprivation of the most basic and non-negotiable needs, which threatened the citizens’ need for survival, has been the primary cause for aggression to come into existence. The factors that, thus, led to the conflict in Syria can be seen rooted in years of repression, poverty, and lack of representative institutions, which manifested in the form of protests, or the Arab Spring of 2011.

    The Syrian economic crisis has existed long before the commencement of the civil war. Since the beginning of the economic crisis, Syria’s institutional structures have failed to meet the rising needs and rights of its population. In the 1980s, the country was trapped in a downward spiral of a fiscal crisis, as a result of large-scale drought, and due to both, domestic and external factors. The crisis led to high food deficit, and an increase in the cost of living, leading to a rise in patronage networks which provided small circles of elites with profitable businesses. These networks became increasingly popular in real estate and land management, leaving out large sectors of Syria underdeveloped.

    While the country witnessed a decreasing overall debt and a noticeable rise in the GDP in the 2000s, large sections of the population were excluded from benefitting from these growth rates due to differences in wage rates and declining job opportunities. Increasing inequality was reflected in a paper published by the UNDP, which claimed that 65.6% of all labour in Syria belonged to the informal sector in 2010, with Aleppo and Idlib ranking first with over 75% of their workforce belonging to the informal sector. Further, the four years of drought between 2006 and 2011, and the consequent failed economic policies led to a significant decline in the agricultural sector’s output, forcing 2 million to 3 million Syrians into abject poverty.

    Additionally, the oil revenues fell from more than 14% of GDP in the early 2000s to about 4% in 2010 due to depleting reserves. According to a report, overall poverty in Syria in 2007 impacted 33.6% of the population, of which 12.3% were estimated to be living under extreme poverty. Noting the degree of inequality in Syria in 1997, the report found out that the lower 20% of the population had a share of only 8% in expenditure, while the richest 20% of the population share about 41% of the expenditure. The degree of inequality further decreased in 2004. Moreover, the widely disputed region of North-Eastern Syria witnessed highest levels of inequality in 2007, in addition to deprivation of living standards, and worst levels of illiteracy, and access to safe water, just four years before the outbreak of the civil war. The unequal access to resources was also starkly reflected in the housing situation of the country before the war, where over 40% of the population lived under informal housing conditions, – through squatting, or on lands obtained without legal contracts.

    In addition to the economic crisis, Syrians have been the victims of decades-long political repression, in the form of restrictions on freedom of expression, torture, and enforced disappearances. The political institutions have historically been unstable, with three military coups taking place in 1949 alone, followed by one more in 1954, in addition to the Ba’athist-led coups of 1963 and 1966. The Syrian security forces (Mukhabarat) are known to have detained citizens without proper warrants even before 2010, many of whom have reportedly been tortured in prisons. In their attempts to keep the hierarchy of power relations intact, the centralised institutions are known to clamp down on any public demonstrations, with frequent arrests and employment of state violence.

    The conflict which started with citizens demanding their basic needs and rights has been sustained over the years by the involvement of foreign states, and increased state brutality which has been responded to by an increasingly similar, if not equal, force by the rebellion groups.

    Years of conflict have exacerbated the economic crisis, pushing both the state and its citizens, into chaos, with more than 80 per cent of the Syrian population living below the poverty line, with an unemployment rate of at least 55 per cent in 2018. With most of the business networks now being controlled by the selected few elites, the population at large continues to suffer the brunt of both structural, and direct violence.

    The conflict which started with citizens demanding their basic needs and rights has been sustained over the years by the involvement of foreign states, and increased state brutality which has been responded to by an increasingly similar, if not equal, force by the rebellion groups. The country, now, witnesses itself entangled in a cycle of conflict, where the war has led to steep economic deterioration, political repression, and physical violence, which in turn has led to further widespread cataclysm.

    Image Credit: Photo – Aleppo-Syria destruction in 2019 and  Syria Map – Adobe Stock

  • Lebanon’s Food Security Crisis

    Lebanon’s Food Security Crisis

    Security has been a buzzword in the arena of International Politics since the Cold War, and this is widely recognized to be the subject’s genesis as articulated by Barry Buzan and Lene Hansen in their book, The Evolution of International Security Studies. The traditional view of security as largely related to military is the aspect that is given the most prominent focus in discourses on the subject. However, since the 1990s, “societal security” and concepts related to people are broader and sub-concepts such as food security have gained in importance. Food security looks at how much food is available, the access and affordability of food to all people in a country. Food security is also the ability of the country to keep sufficient food available during tough times, such as inflation, disasters, and other such hardships. The Food Climate Research Network speaks of the five factors of food security; availability of food, access to food, utilization of food, stability, and malnutrition. Perhaps food security is one of the most essential forms of security, as the lack of food leads to starvation. This is the reason one hears of bread riots and bread in many protest slogans; ‘bread’ symbolizes food security and represents people’s survival. The economic meltdown of Lebanon and the failure of governance has created a human catastrophe of instability and poverty. The recent Beirut explosion has highlighted not only the failure of the government but a complete breakdown of safety and social security for its common citizens. Under the current circumstances, Lebanon’s food security situation is a major cause for concern.

    Hikes in Food Prices

    Lebanon today is a country with massive debt, income inequality, with much of its revenue going towards servicing of national debts. In addition, Lebanon has been facing high inflation for the last few months, making it very difficult for families to access food. As a result, basic food items are overpriced and in short supply; for instance, a pat of butter costs 9.4 Euros.  Meat, fruits and other commodities have become luxuries for most Lebanese citizens. There are huge breadlines across Lebanon, and many grocery stores cannot afford to buy food to sell to consumers. The COVID-19 crisis has compounded the economic crisis. Prices of eight basic food items have increased by 56%. Lebanon’s food crisis is so grave that parents are bartering their children’s toys and furniture for food online.

     Economic collapse and Food Security

    The most circulated pictures over the last few weeks on media are of the explosion in Beirut and the spillage of grains. This blast occurred because of the unsafe storage of ammonium nitrate and has led to the death of over 200 people, with over 6,000 injured so far. There are many still missing. For Lebanon, this is a triple layer of burden, as the country is fighting a mismanaged economy, a pandemic, and now the horrific aftermath of the explosion. Post the explosion, many countries and global institutions have rushed emergency support by providing minimal aid and funding to facilitate fast recovery from this catastrophe.  While the world has come together to help Lebanon, the situation remains grim because of the shortage of various necessities like medicine and food. The second-largest port in Lebanon, Tripoli has some storage of flour; however, this suffices to cover just one month’s requirements. Beirut port, the largest in Lebanon, is virtually unusable because of the blast. The port infrastructure is severely damaged, thus hurting imports. Lebanon is a country that relies hugely on imports; it imports 85% of its food from outside, making this a major crisis . By one estimate the blast has destroyed 120,000 metric tons of grains, and this could affect food availability as well as sky-rocketing of food prices. The United Nations Food Program reiterated that Lebanon is in a grim situation regarding food security. The current assessment is that the grains can sustain them for less than a month.

    Grim Outlook and Tough Challenges

    The looming food security crisis is a direct fall-out of the economic collapse and multiple crises facing the country. Discontent with the government in Lebanon is not new, since the protests have been on since last October. The explosion and its resulting loss of life and property have triggered waves of protests again, forcing Hassan Diab, the Prime Minister of Lebanon, to step down from his office on 10th August. Decades of poor governance, entrenched kleptocracy, corrupt political class, criminal negligence, incompetence and economic mismanagement have led to the current catastrophe. The former economy minister, Nasser Saidi, says that ‘Lebanon is on the brink of the abyss of depression, with GDP declining by 25% this year, growing unemployment, hyperinflation, and humanitarian disaster with poverty exceeding half the population. The growing food crisis and poverty could lead to famine conditions’. The government will need to address income inequality, large-scale corruption, and the role of foreign players in contributing to the economic collapse.  Financial institutions and other creditors, more often foreign powers, need to suspend debt repayments and allow the Lebanese economy to recoup; since a considerable portion of the revenue goes into debt servicing, which is unsustainable for long.  International funding agencies, while sympathetic to the common peoples’ plight, are hesitant to go ahead with aid due to the poor governance track record of the political class. By some estimates, they put the immediate requirement for humanitarian aid and the cost of rebuilding essential infrastructure post the blast at USD 15 billion. This pales compared to the even bigger mess in the financial system. Ghazi Wazni, the country’s finance minister who quit with the rest of the government last week, has put the total losses in the banking system at $83 billion, and a black hole in the central banking system of $50 billion. The people are displaying discontent over the sectarian politics that have afflicted the country for decades and are the root cause of endemic corruption. Last year’s protests led to a new government in December, which was forced to resign post the explosion.

    Amidst the political crisis, food security is increasingly the major problem in Lebanon for months now. The blast has left 300,000 people homeless.  International Organizations and Civil Society Organizations, Ukraine, Russia, and the United States are enabling and mobilizing food supplies.

    Poverty is the immediate concern; there are already one million Lebanese in poverty, with the likelihood of more than half of the Lebanese population falling into poverty. Food shortages will most likely result in starvation, malnutrition, and death. Looking at the five tenets of food security mentioned above, Lebanon satisfies neither of the five criteria. Lebanon is an example of how decades of factional strife, warlordism, corruption, and power in the hands of the kleptocratic elite can push a country and its people into the abyss of poverty. While resolving Lebanon’s food security crisis is possible through immediate international aid and support, resolving the larger problem of its economic mess and humanitarian catastrophe will need international intervention.

  • Consolidating India-ASEAN Strategic Partnership under Chairmanship of Vietnam

    Consolidating India-ASEAN Strategic Partnership under Chairmanship of Vietnam

    During the first six months of the year, there were 26 meetings and most of these were through video-conferencing, exhibiting a high degree of commitment by the ASEAN under the Chairmanship of Vietnam.    

    Vietnam’s Chairmanship of the ASEAN comes at a time of immense turbulence marked by COVID-19 pandemic, disruption in the global supply chains resulting in economic recession among major economies, and strategic instability in the Indo-Pacific region marked by high tensions between the United States and China in the South China Sea. However, the ASEAN calendar of engagements with its Partner countries has remained busy, and Vietnam has spearheaded the Organisation with adeptness and alacrity and sustained the momentum of the ASEAN’s mandate through meetings and conversations.  During the first six months of the year, there were 26 meetings and most of these were through video-conferencing, exhibiting a high degree of commitment by the ASEAN under the Chairmanship of Vietnam.

     On 16 June 2020, at the 20th ASEAN-India Joint Cooperation Committee Meeting, through a video conference, India and the ASEAN “reaffirmed their commitment to further strengthen and deepen their cooperation.” Both sides noted the progress made for the implementation of the ASEAN-India Plan of Action (2016-2020), and “shared their commitment to complete the development of the new Plan of Action for 2021-2025 to further strengthen their strategic partnership over the next five years”.[i]

    A month later Secretary (East), Ministry of External Affairs (MEA), India, participated in the 22nd annual meeting of the Senior officials of ASEAN countries and India, and commended Viet Nam’s ASEAN chairmanship. Both sides “agreed to continue assisting each other’s citizens affected by the coronavirus outbreak”; provide “ASEAN countries with detailed information about the Indo-Pacific Ocean Initiative proposed by Indian Prime Minister Narendra Modi at the 16th ASEAN-India Summit in 2019”; welcomed “ASEAN bringing into play its role in fostering cooperation, dialogue and trust building in the region”; and conveyed India’s support for “efforts to seriously and fully implement the Declaration on the Conduct of Parties in the East Sea and build an efficient and effective Code of Conduct in the waters in line with international law and the 1982 UN Convention on the Law of the Sea”.[ii]

    COVID-19 Pandemic

    India and ASEAN are confronted with COVID-19 pandemic and there is ample evidence that both sides have conveyed their intention to fight the pandemic together. Prime Minister Modi engaged the leaders of Indonesia, Myanmar, Thailand, Singapore and Vietnam through telephonic conversations and assured support to ASEAN Member States. Likewise, Indian Foreign Secretary Harsh Vardhan Shringla has had weekly tele-conversations with counterparts from US, Australia, Japan, South Korea, New Zealand, and Vietnam to share ideas and best practices in the Indo-Pacific region for responding to COVID-19 pandemic.[iii]

    It is an opportune moment for the officials of the health departments in India and ASEAN to set up a dedicated virtual platform/dashboard designated as ‘India-ASEAN Meeting for Health Development (AI-MHD) that can be pluggedinto the ‘ASEAN Emergency Operations Centre (EOC) Network, the ASEAN Risk Assessment and Risk Communication Centre, the ASEAN Bio Diaspora Virtual Center (ABVC) and the ASEAN Centre for Humanitarian Assistance on disaster management (AHA Centre) for future public health emergencies’.

     India’s External Affairs Minister Dr. S. Jayashankar, in his remarks at the 6th Roundtable Meeting of ASEAN-India Network of Think Tanks (AINTT), noted that “the impact of the Coronavirus has been beyond our collective imagination. Current estimates put the cumulative loss in the range of USD 5.8-8.8 trillion or approximately 6.5-9.7% of the global GDP.[iv]

    ASEAN Outlook on the Indo Pacific (AOIP)

    India has acknowledged the importance of the ASEAN Outlook on the Indo Pacific (AOIP) and New Delhi is committed to “explore cooperation in the key areas outlined in the AOIP, covering maritime cooperation, connectivity, sustainable development and economic cooperation, in order to contribute to the maintenance of peace, freedom and prosperity in the region”.[v] Similarly, ASEAN has endorsed synergies in various sectors and promoted regional frameworks under India’s Act East Policy, and SAGAR (Security and Growth for All in the Region) vision. Although health and pandemic issues are conspicuously absent in the AIOP and SAGAR, but these are surely part of the broader thematic issues contained therein.

    India is committed to positive contribution to ASEAN-led mechanisms such as the East Asia Summit (EAS), the ASEAN Regional Forum (ARF), the ASEAN Defence Ministers’ Meeting-Plus (ADMM-Plus). It is a staunch believer of ‘rule of law’ and India believes that a Code of Conduct is a useful solution to reduce tensions in the South China Sea.

    On November 04, 2019, Prime Minister Narendra Modi launched the Indo Pacific Oceans’ Initiative (IPOI) at the East Asia Summit held in Bangkok, Thailand.[vi] It is an “ an open global initiative” and “ draws on existing regional cooperation architecture and mechanisms to focus on seven central pillars conceived around Maritime Security; Maritime Ecology; Maritime Resources; Capacity Building and Resource Sharing; Disaster Risk Reduction and Management; Science, Technology and Academic Cooperation; and Trade Connectivity and Maritime Transport.”

    Cooperation, Dialogue and Trust Building

    India is committed to positive contribution to ASEAN-led mechanisms such as the East Asia Summit (EAS), the ASEAN Regional Forum (ARF), the ASEAN Defence Ministers’ Meeting-Plus (ADMM-Plus). It is a staunch believer of ‘rule of law’ and India believes that a Code of Conduct is a useful solution to reduce tensions in the South China Sea. India’s Foreign Minister has stated that India is working in conjunction with Vietnam and “responses to that (CoC) are being handled by the Vietnamese and that is the way it should be,” [vii]

                Finally, it has been noted that “as we come out of this pandemic, let us be clear on one fact. The world will never be the same again. That means new thinking, fresh ideas, more imagination and greater openness. We need to go beyond orthodoxies, whether of trade, politics or security. These are domains that all of you debate regularly and I am sure today you will have a very productive discussion.”[viii]  It is useful for ASEAN and India to explore commonalities and convergences in the ASEAN Outlook on the Indo Pacific (AOIP) and the Indo Pacific Oceans’ Initiative (IPOI). In this context, Vietnam has the unique opportunity to further expand, deepen and strengthen the ASEAN India Strategic Partnership.

     

    Notes

    [i] “ASEAN, India strengthen cooperation”, https://asean.org/asean-india-strengthen-cooperation/ (accessed 20 August 2020).

    [ii] “ASEAN, Indian senior officials gather at online 22nd meeting”, https://www.asean2020.vn/xem-chi-tiet1/-/asset_publisher/ynfWm23dDfpd/content/asean-indian-senior-officials-gather-at-online-22nd-meeting (accessed 20 August 2020).

     

    [iii] “Cooperation among select countries of the Indo-Pacific in fighting COVID-19 pandemic”, https://mea.gov.in/press-releases.htm?dtl/32691/Cooperation+among+select+countries+of+the+IndoPacific+in+fighting+COVID19+pandemic (accessed 20 August 2020).

    [iv] “Remarks by EAM during the 6th Roundtable Meeting of ASEAN-India Network of Think Tanks (AINTT)”,https://www.mea.gov.in/Speeches-Statements.htm?dtl/32904/Remarks_by_EAM_during_the_6th_Roundtable_Meeting_of_ASEANIndia_Network_of_Think_Tanks_AINTT(accessed 20 August 2020).

    [v] “ASEAN Outlook On The Indo-Pacific” https://asean.org/storage/2019/06/ASEAN-Outlook-on-the-Indo-Pacific_FINAL_22062019.pdf (accessed 20 August 2020).

    [vi] “Ministry of External Affairs Indo-Pacific Division Briefs”, https://mea.gov.in/Portal/ForeignRelation/Indo_Feb_07_2020.pdf (accessed 20 August 20200.

    [vii] “Incident between Indian, Chinese militaries was ‘not skirmish but face-off’: Jaishankar”,https://economictimes.indiatimes.com/news/defence/incident-between-indian-chinese-militaries-was-not-skirmish-but-face-off-  (accessed 20 August 2020).

    [viii] “Remarks by EAM during the 6th Roundtable Meeting of ASEAN-India Network of Think Tanks (AINTT)”, https://www.mea.gov.in/Speeches-Statements.htm?dtl/32904/Remarks_by_EAM_during_the_6th_Roundtable_Meeting_of_ASEANIndia_Network_of_Think_Tanks_AINTT (accessed 20 August 2020).

     

    Image Credit: Asia Times

  • India-China Border Stand-Off

    India-China Border Stand-Off

    On the 5th and 6th May 2020, Chinese incursions were reported at a very large frontage along the Line of Actual Control (LAC); starting from Naku La in north Sikkim, in Finger area of Pangong Tso, in Galwan Valley, Hot springs and Gogra heights located north-east of Galwan Valley. These incursions were a little different from all previous border standoffs. This time the Chinese incursion has been at multiple places and also, they had come prepared with weapons, vehicles and tents. They had come in large numbers with an intent to dig in.
    The issue came to light when scuffles were reported by the media on 10 May that some Chinese had intruded into the Muguthang Valley at Naku La and asked Indians to vacate the area as they claimed that it was their land. A scuffle ensued . According to PTI, the incident involved 150 soldiers. During the incident, the two sides threw stones at each other.

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  • India-China Trade In Ancient Times: Southern Silk Route

    India-China Trade In Ancient Times: Southern Silk Route

    To follow the Silk Road is to follow a ghost. It flows through the heart of Asia, but it has officially vanished leaving behind the pattern of its restlessness: counterfeit borders, unmapped peoples. The road forks and wanders wherever you are. It is not a single way, but many: a web of choices.

    Colin Thubron, Shadow of the Silk Road.

    Introduction

    India and China, two Asian giants, share a lot of similarities in terms of history and culture. Both countries represent age old civilizations and unique history. Cultural and economic ties between the two countries date back to about 2000 years ago. The Silk Route, which is an ancient network of trade routes, formally established by the Han Dynasty, served as a connection between the two countries. It was also through this route that Buddhism spread to China and East Asia from India. The routes were more than just trade routes; it was the carrier of ideas, innovations, inventions, discoveries, myths and many more.
    The earliest mention of China can be found in the Indian text “Arthashastra” which was written by Kautilya in the fourth century BC. Kautilya made a remark about Cinapattasca Cinabhumjia (Cinapatta is a product of China)[1]. Whereas, the earliest mention of India in Chinese records dates between 130 and 125 BC. Zhang Qian, a Chinese envoy to Central Asia, referred to India as Shendu, in his report about India to Emperor Wu of the Han dynasty.
    This article will look into the ancient trade route that existed between South Western China and India’s North East region via Myanmar and the future of the trade route.

    Ancient trade links between India and China

    Shiji, which is the first Chinese dynastic history, compiled between 104 and 87 BCE talks about the existence of a trading route between India and South West China. According to Chinese records, Emperor Wu of the Han dynasty, tried to establish a trade route from Changan, the Chinese capital to North East India through Yunnan and adjoining areas. However, the rulers of Yunnan were against the idea of establishing a direct trade between India and China and Emperor Wu failed to establish the trade route. Even though the trade route failed to take off, the trade in Cinapatta and Chinese square bamboo continued without any hindrance.

    Political Geography of the Southern Silk Route

    The Southern Silk route (SSR), one of the least studied overland route, is a trade route which is about 2000 km long and linked East and North East India with Yunnan Province of China via Myanmar. This is a relatively unknown, ancient trade route that is considered a part of the larger web of Silk Roads. This route existed before the Central Asian Silk route became popular. This trade route between Eastern India and China came to be known during the early 3rd century BCE, and it became popular by the 2nd century BCE. By 7th century AD various other branches of the SSR emerged to create web of trading routes.
    Traders carried silk from Yunnan through Myanmar, across India and joined the main silk route in Afghanistan. In addition, silk was also transported from South West China through the Shan states and North Myanmar into East India and then down to the Coromandel Coast.
    The Qing dynasty which ruled China from 1644-1912, recorded the cross cultural exchanges that took place across SSR. This route contributed to cultural exchanges between China and the West. It also promoted interactions among different nationalities.
    Indian sources have failed to provide abundant evidence about the SSR and the interaction that took place across this route but there is enough evidence that indicates that trade and migration did take place in the Eastern India-Upper Myanmar-Yunnan region. For example, modern scholars believed that the Tai Ahoms were originally from Yunnan but they migrated to North East India and founded a small kingdom around 13th century, which grew to become the powerful Ahom Kingdom of Assam.
    The areas through which the SSR passed were inhabited by various ethnic groups whose political, social and economic organizations were primitive and backward. As a result, the safety of the route was often questioned. Archeological evidences have been found along the Southern banks of Brahmaputra up to Myanmar border, which shows that trade did exist along this route.
    The main items that were exported from China via this route included Silk, Sichuan cloth, Bamboo walking sticks, ironware and other handicrafts items. Sichuan, a South Western province was the main source of silk. Glass beads, jewels, emeralds etc were some of the items that were imported to China.
    Another important trade route is the South West Silk route or the Sikkim Silk route, which connected Yunnan, and India through Tibet. A section of the route from Lhasa crossing Chumbi Valley, Nathu La Pass connected to the Tamralipta Port (present day Tamluk in West Bengal). From the Tamralipta port, this trade route took to the sea to traverse to Sri Lanka, Bali, Java and other parts of the Far East. Another section of the route crossed Myanmar and entered India through Kamrup (Assam) and connected the ports of Bengal and present day Bangladesh.
    Over time, the Southern Silk Route lost its prominence and it was in 1885 that it re- emerged as a strategic link as the British tried to control some parts of the route in order to access and gain control over Southern China.
    The strategic importance of the route increased during World War II. In 1945, Ledo Road or Stilwell Road was constructed from Ledo, Assam to Kunming, Yunnan to supply aid and troops to China for the war with Japan. Ledo Road is the shortest land route between North East India and South West China. However, after the war the road was left unused and in 2010, BBC reported that much of the Ledo road has been swallowed up by jungle.
    The Assam-Myanmar-Yunnan road is very difficult to traverse not only in the present times but also during the ancient times. However, despite the hard conditions, it is through this route that a golden triangle of drug trafficking, movement of terrorist and smuggling functions today.

    Future Potential: Reviving the Southern Silk Route Economy

    North-East India and the Yunnan province share many similarities. Both are landlocked as well as under developed regions. Both are home to a large number of ethnic groups and have witnessed secessionist movement from time to time. Apart from this, Yunnan and North East India are geographically isolated from their political capitals.
    Yunnan and North East India, home to rich varieties of subtropical fruits with high nutritional values and medicinal plants, can cooperate and transform the hills of North East India and South West China into plantations, factories, laboratories to produce processed food products and lifesaving drugs that can find a huge market in developing and developed countries.
    In a bid to revive the Southern Silk route, Bangladesh, China, India and Myanmar, signed the Kunming Initiative, a sub-regional organization, in 1999. This initiative was replaced by the Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC) in 2015. The BCIM-EC was announced by China as a part of its Belt-Road Initiative, which has been boycotted by India since the beginning. In 2019, the BCIM-EC was dropped from the list of 35 projects that are to be undertaken under BRI, indicating that China has disreagrded the project. However, in the same year India has sought to keep the BCIM-EC project alive.
    If the BCIM-EC project does take place, it will reduce the travel time, cut transportation cost, open up markets, provide way for joint exploration and development of natural resources and create production bases along the way. Before the BCIM-EC takes off, it is important to develop the roadways infrastructure of India’s North East region.
    Even though the BCIM-EC promises to elevate the economic conditions of the backward North-East region of India, it has not gained sufficient steam as both China and India have different apprehensions. China sees India’s reluctance to support BRI as the barrier for any progress in the project. Given the current stand-off in Ladakh, India’s apprehensions about China seeking to exploit the insurgent groups operating in the region gains significance. Either way realizing the Southern Silk Road as a viable project in the form of BCIM-Economic Corridor looks distant now.
    [1]Haraprasad Ray, “Southern Silk Route: A Perspective,” in The Southern Silk Route : Historical Links and Contemporary Convergences (Routledge, 2019).

    References

    Ray, Haraprasad. “Southern Silk Route: A Perspective.” Essay. In The Southern Silk Route: Historical Links and Contemporary Convergences. Routledge, 2019.
    “Continental and Maritime Silk Routes: Prospects of India- China Co-operations.” In Proceedings of the 1st ORF-ROII Symposium. Kunming, 2015.
    Mukherjee, Rila. “Routes into the Present.” Essay. In Narratives, Routes and Intersections in Pre-Modern Asia, 37–40. Routledge, 2017.
    UNESCO. Accessed June 20, 2020. https://en.unesco.org/silkroad/content/did-you-know-great-silk-roads.
    “The Silk Route.” Accessed June 21, 2020. http://www.sikkimsilkroute.com/about-silk-route/.
    Ray, Haraprasad. Introduction. In North East India’s Place in India-China Relations and Its Future Role in India’s Economy, n.d.
    Chowdhury, Debasish Roy. “’Southern Silk Road’ Linking China and India Seen as Key to Boosting Ties.” South China Morning Post, October 23, 2013.
    “China Wants to Revive ‘Southern Silk Road’ with India.” The Times of India, June 9, 2013.

    Image: Stilwel Road from Ledo in Northeast India to Kunming in Yunnan province, China

  • India-Australia Strategic Partnership: Leveraging Aerospace Capacity

    India-Australia Strategic Partnership: Leveraging Aerospace Capacity

    Category : India India’s, Military, India-Australia Relations
    Title : India-Australia strategic partnership: Leveraging aerospace capacity
    Author : M Matheswaran 02-06-2020

    The forthcoming virtual summit between Indian Prime Minister Narendra Modi and Australian Prime Minister Scott Morrison assumes considerable significance for an India-Australia strategic partnership, particularly as it comes against the backdrop of heightened friction with China for both countries. Enhanced defence cooperation between the two countries could be an important signal to Beijing of the costs of overly assertive strategic behaviour – whether in the Himalaya or in trade. For some years, defence cooperation has largely focused on the naval relationship. Now is the time for enhanced air-power cooperation.

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  • ASEAN Unity Critical for South China Sea: But Time to Address Newer Issues

    ASEAN Unity Critical for South China Sea: But Time to Address Newer Issues

    Perhaps the most defining character of the ASEAN in the last six decades of its existence has been ‘Unity’ among its Member States who have scrupulously adhered to the fundamental principles contained in the various treaties signed by the Member States. The ‘ASEAN Way’ is unique and helps them to remain ‘united’ despite diversity in their political systems, national economic indicators, development levels, and military capabilities. ASEAN has also done well to be labelled as the ‘driver of regional integration’ and promoted a variety of regional political, security and economic initiatives to ensure peace and stability. It has managed with sophistication and alacrity relations with its partner countries bilaterally as also through multilateral structure.

    The ‘ASEAN Way’ is unique and helps them to remain ‘united’ despite diversity in their political systems, national economic indicators, development levels, and military capabilities.

    ASEAN’s engagements with China are through various political and diplomatic exchanges such as Summits and several ASEAN led mechanisms also provide opportunities to its Member States to engage China. The free trade agreement (FTA) is particularly important and catalytic for trade and both sides have taken upon themselves to accelerate negotiations of the Regional Comprehensive Economic Partnership (RCEP).

    At the strategic level, ASEAN Member States have been quite disillusioned with China over its intention to resolve disputes in South China Sea; but the ASEAN leadership has assiduously pursued the Code of Conduct in the South China Sea and succeeded in completing the first reading of the Single Draft COC Negotiating Text. It is now putting pressure on China to quickly conclude the CoC in the stipulated timeframe to ensure region remains peaceful and stable to enable member countries to invest in national and regional development.

    Ironically some ASEAN Member States have not been keen to openly making reference to Chinese reclamation in South China Sea and near continuous buildup of military infrastructure on islands and features in the Parcels and the Spratly group of islands.

    The report card of ASEAN Unity vis a vis China, so far, has been just about quite decent with at least two exceptions when China was suspected of interfering in ASEAN matters; first in 2012, Cambodia resisted reference to South China Sea in the Chairman’s statement, and again in 2016 soon after the South China Sea Arbitration award.[i]

    Ironically some ASEAN Member States have not been keen to openly making reference to Chinese reclamation in South China Sea and near continuous buildup of military infrastructure on islands and features in the Parcels and the Spratly group of islands. While Vietnam and the Philippines have openly confronted China over their claims in South China Sea, Malaysia chose to pursue “quiet diplomacy” but has stubbornly displayed “lawfare in the South China Sea”;[ii] Brunei has remained quiet because its policy makers “see little choice but to remain quiescent about its dispute with China,” Notwithstanding that, the Chairman’s Statement of the 36th ASEAN Summit 26 June 2020 is a clear display of their ‘unity’ and they have collectively expressed concerns on the Chinese activities and recognised the seriousness of a series of incident at sea which have eroded trust and confidence.

    To some extent ASEAN has succeeded in internationalising the Chinese non-compliance of international treaties such as the 1982 UNCLOS to which Beijing is a signatory.

    Today, South China Sea issue has made global headlines. The US has unabashedly rejected Chinese claims over South China Sea and China is accused of not adhering to internal law. To some extent ASEAN has succeeded in internationalizing the Chinese non-compliance of international treaties such as the 1982 UNCLOS to which Beijing is a signatory as also retained a “minimal formal consensus on the South China Sea, rejecting the pernicious idea that the waterway is only the concern of littoral states, and resisting Chinese pressures to avoid discussion of the issue in ASEAN -led forums, certainly contributed to this outcome.”[iii]

    Perhaps it is time for the ASEAN to bring to the forefront the Lachang-Mekong river issue. Several trans-boundary river management issues and concerns between China (the upper riparian and Thailand, Laos, Cambodia and Vietnam (the lower riparian) have emerged over the years. China has been building dams on the river and its tributaries; has avoided sharing full hydrological data particularly during dry seasons; and released river water untimely. The lower riparian states have called for a ‘code of conduct’ and a ‘rule based trans-boundary resource management’ mechanism for the Mekong River between the upper and the lower riparian states.[iv]

    It is tempting to believe that China has successfully stifled lower riparian member states concerns through sops and infrastructure development projects under the Belt and Road Initiative. Interestingly, Lancang-Mekong Cooperation (LMC), the most active forum is dominated by China.

    Non-riparian ASEAN members are accused of “minimal interest” in the Lancang-Mekong issues and they “generally do not participate”. Even attempts to interest the rest of ASEAN on Mekong issues “are met with only the pretense of polite interest”. [v]

      If ASEAN is to preserve ‘unity’ it must see maritime and continental Southeast Asia as one strategic space and take into account challenges faced by ASEAN Member States who border China on land particularly Myanmar who has accused China of interfering in its internal politics and arming the ethnic armed groups operating near the Chinese border,[vi]  and Laos[vii] that is economically and militarily weak to fend off Chinese pressures unlike Vietnam which has withstood Chinese pressures on land and at sea. Otherwise, China will open yet another contentious front for the ASEAN.  Finally, under the circumstances, prudence necessitates that ASEAN should prepare to incorporate newer issues other than the South China Sea in its agenda!

    Notes:
    [i] “ASEAN deadlocked on South China Sea, Cambodia blocks statement, https://www.reuters.com/article/us-southchinasea-ruling-asean/asean-deadlocked-on-south-china-sea-cambodia-blocks-statement-idUSKCN1050F6 (accessed 18 July 2020).
    [ii] “US-China tensions: why is Malaysia so quiet about the South China Sea?”, https://www.scmp.com/week-asia/politics/article/3093715/us-china-tensions-why-malaysia-so-quiet-about-south-china-sea (accessed 18 July 2020).
    [iii] “Why Asean should treat the Mekong like the South China Sea”, https://www.scmp.com/week-asia/opinion/article/3093546/why-asean-should-treat-mekong-south-china-sea (accessed 18 July 2020).
    [iv] Chheang Vannarith, “Code of conduct for the Mekong”, https://www.khmertimeskh.com/298648/code-of-conduct-for-the-mekong/ (accessed 19 July 2020).
    [v]“Why Asean should treat the Mekong like the South China Sea”, https://www.scmp.com/week-asia/opinion/article/3093546/why-asean-should-treat-mekong-south-china-sea (accessed 18 July 2020).
    [vi] “After ASEAN & India, Now Myanmar Accuses China of Creating trouble on the Border”, https://eurasiantimes.com/now-myanmar-accuses-china-for-creating-trouble-in-the-country/ (accessed 19 July 2020).
    [vii] China also claims its right over a large part of Laos on historical precedents (China’s Yuan Dynasty, 1271-1368). “China faces territorial issues with 18 nations; check details”, https://zeenews.india.com/world/china-faces-territorial-issues-with-18-nations-check-details-2292826.html (accessed 19 July 2020).

    Image: Adobe Stock

  • What After The Galwan Incident?

    What After The Galwan Incident?

    As one writes, a phase of the events in the Galwan valley near the Line of Actual Control (LAC) has come to an end. Inputs from government, media and private commentators, have provided a perspective of the events preceding the incidents of 15/16 June and thereafter till the current day. For the world, the occasion has provided the opportunity yet again to witness the fighting spirit and junior leadership of all ranks of the Indian Army, who despite being outnumbered, were able to inflict far greater casualties on their adversaries, in inhospitable terrain under fading light conditions. The sacrifices of the men of 16 BIHAR, 3 PUNJAB, 3 Medium Regiment, and individual personnel from 81 Field Regiment, Corps of Signals and the Army Medical Corps have added lustre to the reputation of the Indian military. Their deeds shall remain enshrined in the memory of a grateful nation. At this watershed moment, we salute them.
    China is contesting control over settled areas (Galwan), exploiting laid down rules and norms of border management by resorting to use of primitive weapons instead of firearms, and pushing the envelope on the ground in attempting to increase areas under control such as at Hot Springs and Pangong Tso – all actions just short of war.
    One theory gaining currency in attempting to understand China’s recent behaviour, pertains to its unhappiness over what it perceives as alteration of the status quo on the LAC by designating Ladakh as a Union Territory – resulting in active collusion with Pakistan which shares Beijing’s sentiments on this issue, amongst others. However, there is no doubt that the strategy applied by China in East Ladakh comes straight out of its manual on Grey Zone Warfare. It is contesting control over settled areas (Galwan), exploiting laid down rules and norms of border management by resorting to use of primitive weapons instead of firearms, and pushing the envelope on the ground in attempting to increase areas under control such as at Hot Springs and Pangong Tso – all actions just short of war.

    While the situation on the Pangong Tso awaits resolution, what is amply clear is that the era of explaining away patrol clashes on the LAC to the Indian public, in terms of ‘varying perceptions held by both sides’, is past. By its perfidious actions in East Ladakh this year, China has shredded in letter and spirit the border agreements built up over the last three decades. The recent incidents have brought greater clarity to the public mind, with a consensus that China’s salami slicing tactics cannot be tolerated any further. Indian soldiers see the LAC as a line marked on the map. Commanders are clear that the areas up to that line are to be either physically occupied or patrolled at will from bases in the vicinity, supplemented by other forms of surveillance. As per media reports, the Government has over the weekend ‘revised the Rules of Engagement’, giving ‘a free hand to the Army’ to deal with occurrences of this nature. By implication, in future if patrols cannot resolve their face offs peacefully, there will be no resorting to hand to hand scuffles with primitive weapons – unsuccessful efforts at border management will give way to border defence, through resort to tactical military operations.
    As per media reports, the Government has over the weekend ‘revised the Rules of Engagement’, giving ‘a free hand to the Army’ to deal with occurrences of this nature. By implication, in future if patrols cannot resolve their face offs peacefully, there will be no resorting to hand to hand scuffles with primitive weapons – unsuccessful efforts at border management will give way to border defence, through resort to tactical military operations.
    Response to this new paradigm places another set of challenges before the Indian Army. Prior to May 2020, Galwan was not in the category of disputed areas, as understood in LAC parlance. Neither had any Chinese activity been sensed in the preceding years. While construction of the DSDBO road could be the trigger, the fact that an area where the LAC had lain undisturbed since 1962 could become the scene of such a violent action, warrants scrutiny of PLA intent across the board. Previous assumptions with respect to the PLAs likely areas of interest across the entire Northern border, therefore, certainly warrants a relook. Conclusions drawn would mandate contingency planning and consequent tasking at strategic, operational and tactical levels. Such plans doubtless exist. However, it is obvious that their scope, timelines, and imperatives for successful implementation will need review in conjunction with the other services.
    Outcomes of such reviews would inevitably renew the focus on capability building and in the middle term, might even alter priorities for the same. Substantial enhancements in the areas of surveillance, tactical and strategic air mobility and real time communication links continue to retain their importance. Induction of greater varieties of kinetic non-contact weapon systems, complemented by force multipliers such as cyber warriors and special forces too remain on top of the list. Also, the continued ceasefire violations on the Line of Control to the West, and the relentless tempo of counter terrorist operations in the Valley during this period smack of collusion and tell a tale which defence planners must take note of. Developing the desired capability will be predicated on guaranteed funding and fast track procedures. It is heartening to peruse reports in the Economic Times of 22 June that the Government has granted emergency financial powers up to Rs 500 crore per procurement project to each service for buying weapons and ammunition. Even if new projects cannot be initiated immediately because of fund constraints imposed by the Covid-19 pandemic and otherwise, it is time for stalled ones like the Mountain Strike Corps to be quickly completed. The example of the PLA which has almost completed its reorganisation for fighting wars of the future and tested the response of its field force during the Covid-19 pandemic, must be taken note of.
    Thanks to the Galwan episode, the vital aspect of border infrastructure has gained nationwide attention. There is perceptive increase in the pace of development over the last few years. The sequence and methodology however are dictated essentially by two factors – availability of resources (funds and specialist equipment) and the need for calibrating messages implicit in such actions to China. Despite Covid-19 constraints, the current crisis mandates that funds currently earmarked for infrastructure development continue to flow so that development progresses, albeit at a slower pace. As regards messaging to China, we have reached a watershed moment. As high level military talks continue and spell out the Indian position on the ground to the Chinese, creating an ‘all of nation approach’ for tackling China becomes necessary.
    Galwan incident has ensured that the negative perception of China worldwide is now shared by almost all sections of Indian society. This bitterness is fuelled by the sheer brutality of the Chinese military and duplicity of the Chinese government, bringing back memories of 1962 for many who have only heard of that era. It is driven further by a realisation of the scale of India’s dependence on China, be it in the import of manufactured goods of all hues, or technology, and the consequent harm to Indian interests and livelihoods. Awareness has spread amongst Indians that China’s constant working against India’s interests in world fora, be it in vetoing expansion of the permanent membership of the Security Council for ‘technical reasons’, blocking its membership in the Nuclear Suppliers Group or introducing discussions on Kashmir are all part of its plan to obstruct India’s progress to its rightful place in the comity of nations. In attempting to correct an unequal economic relationship, ensuring that India retains its position in the region and preventing erosion of its influence in South Asia and beyond, all elements of the Indian state have their tasks cut out. It becomes imperative now to prepare a different toolkit with a wider range of options (including those not envisaged earlier) to manage India-China relations. Such options now require to be coordinated at all levels of the government and intimated to stakeholders including industry and other influencers for implementation. This coordination is long overdue. Resetting the economic relationship will not be easy. However, announcement of a practical time bound and holistic road map which has been thought through with all stakeholders would be a beginning.
    Galwan incident has ensured that the negative perception of China worldwide is now shared by almost all sections of Indian society.
    To supplement the proposed policy outlined above, articulation of a holistic Strategic Narrative vis-a-vis China becomes necessary. Such a narrative would pertain to as many aspects as possible – bilateral issues (including border management), local and regional matters, so that consistent, coherent and long term views are voiced, keeping in mind the national interest. information operations would be a subset of such a narrative, and briefings organised as frequently as possible would be useful force multipliers. It might be necessary for the concerned sections in the newly formed Department of Military Affairs and the Department of Defence to coordinate these aspects. India must also actively consider the possibilities that other forms of conflict, including hybrid warfare, are necessary to exploit and invest in the same. Here too, employment of such methodologies by China is an example. China has been refining its doctrine of ‘Unrestricted Warfare’ since the early 90s. The effects are there to see in South China Sea and elsewhere. It is executing certain aspects of this strategy against India on the Northern borders.
    Managing relations with China is destined to remain the major preoccupation for Indian strategic thinkers in coming years. Tensions along the LAC are but one manifestation of this problem. Both nations are hostage to geography. China’s behaviour over the last decade has influenced Indian foreign and military policies like no other, causing India to take decisions that were not in the realms of possibility earlier. Articulating a holistic China strategy through an all of government approach within the overall ambit of a National Security Strategy to ensure that India achieves its rightful place, has never been so important.
    Image Credit: ASPI:The Strategist – Nathan Ruser

  • China’s support to Syria: In Conflict and Redevelopment

    China’s support to Syria: In Conflict and Redevelopment

    China is looking to ramp up relations with Syria both as part of its strategic Belt and Road Initiative (BRI) but also to take advantage of the multi-billion dollar reconstruction effort that is expected to materialise following the gradual winding down of the war.

     

    Syria is an ancient civilisation and also an important part of the ancient silk route, with cities such as Palmyra, Aleppo and Damascus playing an important role in trade and travel between the East and the West. While the discovery of a maritime route between Europe and Asia has to some extent diminished its importance in this regard, Syria is still strategically important. China is looking to ramp up relations with Syria both as part of its strategic Belt and Road Initiative (BRI) but also to take advantage of the multi-billion dollar reconstruction effort that is expected to materialise following the gradual winding down of the war.

    China’s non-interference policy is an integral aspect of its involvement and role in the Middle East. During the course of the Syrian war, China has consistently supported the Bashar Al Assad government on the diplomatic front – through the exercise of the veto power against the resolutions introduced in the United Nations Security Council either condemning the Syrian government, calling for ceasefire or for imposing sanctions on suspected war criminals. While negotiating the renewal of border crossings for aid, China agreed on the need for humanitarian assistance but emphasised on state sovereignty. China’s policy of non-interference has served it well in strengthening bilateral relations and advancing its interests.

    One of the reasons for the diplomatic support extended by China to the Syrian government is also the involvement of the Uighur fighters in the Syrian conflict which has greatly bothered China. While it has never got directly involved militarily in the Syrian conflict there are unconfirmed media reports which suggested that China was sharing military intelligence with the Syrian government and also sent its military advisors to Syria to help it in its fight against the rebels. In this sense, it saw Syria as a key player in its fight against religious extremism thereby preventing its export to its own volatile Xinjiang province.

    With the Syrian conflict slowly winding down and Bashar Al Assad’s hold on Syria greatly strengthened more than at any other time since the beginning of the civil war, China is ramping up its diplomatic efforts in Syria  using trade as an important policy tool to ramp up the relations between the two great civilisations.

    Based on Chinese government’s invitation Syria has participated in the second BRI summit held in Beijing in April 2019. Previously in 2018, China held a Trade Fair on Syrian reconstruction projects which was attended by nearly one thousand Chinese companies and which saw investment proposals of nearly USD two billion. The collapse of most of the industry in Syria due to the war has also resulted in a significant increase of cost-effective Chinese imports into Syria ranging from toys to car parts and industrial machinery and equipment.

    China is also leveraging its economic strength fully by using aid as a foreign policy tool. In 2019,  Xinhua reported on the  that an economic cooperation agreement was signed between Syria’s Planning and International Cooperation Commission (PICC) and the Chinese embassy in Damascus. As part of this agreement, a donation will be set aside to fund a series of humanitarian projects as agreed upon by both sides.

    The collapse of most of the industry in Syria due to the war has also resulted in a significant increase of cost-effective Chinese imports into Syria ranging from toys to car parts and industrial machinery and equipment.

    China is expected to be a key player in the international reconstruction and development effort that is expected to take place in Syria due to its strong bilateral ties with not only Syria but also its alignment with Russian and Iranian position on Syria , these two players being the major supporters of Bashar Al Assad’s government in the civil war. While Russia and Iran are surely expected to carve out a large part of the reconstruction contracts between themselves, their capacity to make the huge investments in these projects, estimated to be worth anywhere between USD 200 million to USD 1  trillion is doubtful. This creates the ripe opportunity for China to enter the reconstruction business effort either by themselves or, as is more likely, in partnership with Russian and Iranian governments or businesses.

    Beyond the business opportunities provided by the potential reconstruction of Syria, China is also strategically interested in Syria. China was always interested in securing access to the Ports of Tartus and Latakia on Syria’s Mediterranean coast. Such an access is expected to complement Beijing’s interests in the Greek port Piraeus (COSCO shipping, the Chinese state-owned shipping and logistics services supplier company in the Port authority) and the Israeli port of Haifa, in securing a trade route to Europe. In alignment with these strategic interests, Chinese companies’ area also exploring the possibility of upgrading the deep seaport of Tripoli, Lebanon to allow it to accommodate larger vessels and also the possibility of building a railroad that would connect Beirut and Tripoli in Lebanon to Homs and Aleppo in Syria.

    Beyond the business opportunities provided by the potential reconstruction of Syria, China is also strategically interested in Syria. China was always interested in securing access to the Ports of Tartus and Latakia on Syria’s Mediterranean coast.

    Chinese investments into and trade ties with Syria however, risk the attraction of US sanctions on Syria. The arrest of Meng Wanzhou, Chief Financial Officer of Huawei, , in Canada, based on a request by the United States highlights the extent of these risks. “The Caesar Syria Civilian Protection Act”, also known as “The Caesar Act”, a United States legislation that sanctions the Syrian government, including Syrian president Bashar al-Assad, for war crimes against the Syrian population, parts of which  are now incorporated  in the “National Defense Authorization Act for Fiscal Year 2020” greatly tightened the sanctions environment against the Syrian government and a number of its industries potentially impacting the Chinese investments and trade ties. While China has called for an end to sanctions stating they were “inhuman,” they have been wary of being targeted by sanctions and further straining their relations with the US. However, it is unlikely that the sanctions would have a significant effect on China given the size of China’s economy and its ability to circumvent sanctions while dealing with Iran and North Korea. China, as part of its ‘mask diplomacy,’ is increasingly providing aid to the Syrian government in their efforts against Covid-19. This serves the dual purpose of strengthening China-Syria relations and strengthening China’s narrative of Covid-19.

    To conclude, China has been a staunch supporter of the incumbent Syrian government of Bashar Al Assad during the almost decade long Syrian civil war and is set to reap the benefits from the post-war Syrian reconstruction effort in conjunction with the Russians and the Iranians to advance its interests.

    Image: Middle East Institute

     

  • Lebanon’s Economic Crisis and Political Unrest

    Lebanon’s Economic Crisis and Political Unrest

    The Lebanon crisis illustrates the outcome of an inefficiently regulated market economy, shaped by long-term instant gratification of economic policies. Economy is run by corrupt institutions with ingrained crony capitalism, bureaucratic regulations and over-reliance on foriegn exchange.

    Lebanon is a free market economy in West Asia, bordered by Syria and Israel and the Mediterranean Sea, and hence, was a frequent recipient of spillovers of unrest and refugee crisis from the neighbouring countries. It is a service-sector dominated (majorly, banks and tourism) economy with a GDP of $56.9 billion─ growth rate of 0.2%, compared to 0.6% the previous year and a workforce of 2.4 million out of which 30 percent include Syrian refugees. The country relies heavily on imports (consumer goods, machinery and equipment etc) with a low dependence on exports (vegetables, non-precious metals and textiles). For years, Lebanon used foreign remittances such as transfers from non-resident Lebanese, foreign deposits and high government loans to balance the trade deficit. Lebanon exchange rate had been kept fixed at 1500 pounds per dollar which was also a fiduciary currency in Lebanon. Thus the higher demand for dollars to fixate the exchange rate, and meet the domestic demand for dollars, is levelled using foreign deposits by offering high yield rates, which had to be further funded by more deposits at even higher interest rates. These faulty policies had sustained the economy until interest payments had snowballed into heavy burden.

    Figure 1: trend of GDP per capita in Lebanon

    Source: Trading Economics

    Lebanese economy is also characterized by high government debt, substantially from domestic banks, borrowed primarily for reconstruction of the economy post civil war (1975-90). Over the years, the government relied more heavily on deficit financing to meet government spending, while the weak governance and corrupt politicians moved along with unfulfilled reforms and poor economic development. There was an underprovision of basic necessities like hassle-free electricity supply, regular water and waste management. On the other hand, crony capitalism had built up, with favours laid out to private businesses which were ultimately owned by rich, exploitative politicians. The debt-to-GDP ratio peaked to 150% by 2019, with a budget deficit of 11.5% of GDP and 50% of the revenues are consumed in debt servicing. This led to an economic crisis, followed by a political crisis, and ultimately snowballed into a financial crisis, rendered vulnerable and  in desperate need of foreign aid to see the day.

    Evidently, though Lebanon crisis started in late 2019, it is the result of long term economic policies mismanaged by corrupt political elite; when the government proposed to tax ‘free-calls in Whatsapp’ to meet the mounting budget deficit in October 2019, protests erupted across the country, catapulting into political unrest and ousting the prime minister. Investors and citizens lost confidence in the system, and led to reducing capital inflows.

    Their sovereign bonds were rated as highly risky assets (probable default),  leading to interest rates as high as 15%. The political uncertainty and the liquidity crunch, led to freezing of external deposits, while the steady domestic and foreign demand for dollars persisted, leading to a shortage of USD. The banks levied restrictions (weekly quotas) on dollar withdrawals, the dollar rate spiked, depreciating the pound, and reducing the purchasing power of the pound. This had squeezed the middle and low income strata the most, draining their last pounds of savings, since their debts substantially constituted dollar repayments. Businesses relying on dollars for most part were affected as the price of imports sky-rocketed, and the oil crunch tightened until the central government stepped in to ease the situation. The condition degraded further by the onset of Coronavirus and the lockdown, which led to widespread unemployment and inflation. The World Bank estimated that 50% of Lebanese population could be pushed below the poverty line by 2020 if immediate action is not taken.

    The debt of Lebanon has built up to 124464 billion LBP, i.e nearly $82 billion and the country has become the 3rd most indebted country in the world. In March 2020, Lebanon government, as a decisive step to prioritize the domestic concerns of the country and retain sustainable foreign exchange reserves in the economy, had defaulted on the Eurobond debt of $1.2 billion for the first time. The ailing economy seeks to restructure the other outstanding debts amounting to $31 billion and has been seeking advice, especially from the IMF on debt restructuring measures. There is a need for an ‘economic rescue plan’ to protect the depositors from this worst economic crisis Lebanon has faced.

    Figure 2: trend of Lebanon government’s debt

    Source: Trading Economics

    Foreign aid from the institutions is a big responsibility, as it would demand austerity measures from the economy that had dwelled in capitalistic pleasures for so long. Though, CEDRE and foreign countries like France and UK have promised ‘soft’ loans to the Lebanese government, economists believe that external aid would be unproductive, and will become an additional debt burden on the already bleeding financial system unless government inculcates greater transparency and accountability to the public, ousting corruption and following through on long-term economic policies with commitment.  Lebanon government is also seeking aid from the IMF. But  this would certainly entail strict reform targets linked to the outflow of credit and hence, is very unlikely.

    For the immediate future, Lebanon’s economic policies should be directed towards increasing  self-reliance in the economy, with higher focus on manufacturing sectors to create employment. Financial policies to stabilize the economy are of primary concern. It is time to make up for the blunders of non-performing investments in the electricity industry. Investments on infrastructural development should be realized and substantial attention should be given to improving  socio-economic conditions of the people. Construction and manufacturing industries should be supported. Actions should be taken to handle the refugee situation, and check the drain of human capital out of the country.   It could be said that Lebanon’s government has a long way to go before it can regain the confidence of its people and the foreign investors in order to stabilize the economy.

    Current Scenario

          Covid 19 has a destructive and deleveraging impact on all the economies, and Lebanon is no exception. The economy is heavily dependent on the service sector, especially tourism, and foreign remittances. The impact of the coronavirus pandemic has been devastating on the money the expats send home, which makes up nearly 12.7% of the GDP, making Lebanon the second-most remittances dependent middle-eastern country, only behind Palestine. Amid the collapsing economy and the disruption triggered by the Covid-19 pandemic, the only certainty is the gathering pace of Lebanon’s political unrest.

     

    REFERENCES

    https://www.nytimes.com/2019/11/15/world/middleeast/lebanon-protests-economy.html?action=click&module=RelatedLinks&pgtype=Article

    https://www.nytimes.com/2020/05/10/world/middleeast/lebanon-economic-crisis.html

    https://www.trtworld.com/magazine/what-s-behind-lebanon-s-economic-crisis-35874

    https://www.nytimes.com/2020/03/07/world/middleeast/lebanon-debt-financial-crisis.html

    https://www.nytimes.com/2019/12/03/world/middleeast/lebanon-protests-corruption.html?action=click&module=RelatedLinks&pgtype=Article

    https://www.theguardian.com/world/2020/mar/07/lebanon-to-default-on-debt-for-first-time-amid-financial-crisis

    https://www.nytimes.com/2020/03/07/world/middleeast/lebanon-debt-financial-crisis.html

    https://www.nytimes.com/2019/10/23/world/middleeast/lebanon-protests.html

    DATA- https://data.worldbank.org/country/lebanon

    https://www.britannica.com/place/Lebanon/Trade

    https://tradingeconomics.com/lebanon/government-debt

     

    Image Credit: Adobe Stock